Japanese investors dump $5.9B in foreign bonds as oil tops $100

Japanese investors sold foreign bonds at the fastest pace in nearly three months during the week ended July 18, as a surge in crude oil prices past $100 a barrel rekindled inflation fears and reinforced expectations that global interest rates will remain elevated longer than anticipated.

Data released Friday by Japan's Ministry of Finance showed investors were net sellers of 970.5 billion yen ($5.92 billion) worth of foreign bonds, their largest weekly net divestment since April 25. The selling was led by long-term debt securities, with a net 714.4 billion yen offloaded, while net sales of short-term foreign bills stood at 256.1 billion yen.economictimes+2

Oil Shock Drives the Selloff

The divestment coincided with a sharp escalation in Middle East tensions. The United States launched fresh strikes on Iran after Tehran-backed Houthi rebels attacked oil tankers in the Red Sea, pushing Brent crude past $100 a barrel on Thursday for the first time since May. Reuters reported that Brent futures settled up 7% at $100.69 a barrel on Wednesday before rising further on Thursday.enca+1

The oil price spike amplified concerns about persistent global inflation. The World Bank in April projected energy prices would surge 24% in 2026, with Brent averaging $86 a barrel for the year, fueling inflation and slowing growth. The latest escalation has pushed prices well above those forecasts.worldbank

Japanese investors were also net sellers of foreign stocks for the first time in five weeks, divesting 121.3 billion yen as a selloff in chipmaker stocks weighed on global markets.zawya

Yen at 40-Year Lows Draws U.S. Warning

The bond selling came as the yen slid toward 40-year lows against the dollar. The currency hit 163.99 per dollar on Thursday night Japan time, according to the Japan Times, its weakest since 1986.japantimes+1

The U.S. Treasury Department on Wednesday warned that the yen's persistent weakness was undesirable, noting the currency had fallen 51% between end-2011 and end-April 2026 in real effective terms. Washington called on the Bank of Japan to continue raising interest rates, keeping investors alert to possible Japanese intervention.investinglive+2

Broader Capital Flow Shifts

The week also saw foreign investors reduce their holdings of Japanese bonds, recording net outflows of 490.7 billion yen — the largest weekly outflow in three weeks — as some overseas holders sold 185.1 billion yen of long-term Japanese bonds and 305.6 billion yen of short-term bills.economictimes+1

The selling spree marked a reversal from just one week earlier, when Japanese investors had pumped a net 1.09 trillion yen into long-term foreign bonds and 745.7 billion yen into short-term foreign debt.japantimes